The JPM report from analyst Terry Belton, which is getting the
attention of players in the money market industry is titled The
Domino Effect of a US Treasury Technical Default and it concludes
that "any delay in making a coupon or principal payment by
Treasury would almost certainly have large systemic effects with
long-term adverse consequences for Treasury finances and the US
economy."

The biggest threat if the US defaults? A Lehman-like run on money
market friends.

You'll recall that post-Lehman, the breaking-of-the-buck of the
money market reserve fund caused a gigantic ron on money markets
that required a bailout.

The collapse in balances looked like this:

JPM

Beyond that, a technical default -- which again, assumes that in
short order the Treasury starts paying its coupon again -- would
have long-term adverse consequences on rates.

The most analogous situation to a US default in recent history
actually happened in Peru in 2000, which defaulted despite not
having any problems making payments.

JPM

There are other impacts as well. A technical default could have a
similar impact on foreign willingness to hold Treasuries as the
conservatorship of Fannie and Freddie had on GSE holdings by
foreigners (they collapsed).

And of course, then, all of this would hit growth. JPMorgan
estimates that we'd see a minimum 1% GDP hit thanks to higher
rates and a presumed selloff in equities.

Of course, a default by the world's most stable nation would
probably have impacts in ways nobody can imagine, but one thing
seems to be clear. The notion --
as some people suggest -- that a default would somehow
increase US credit-worthiness is absurd.